DAVA - Endava Announces Second Quarter Fiscal Year 2023 Results

February, 14 2023 07:07 AM Endava plc American Depositary Shares

Q2 FY2023
30.2% Year on Year Revenue Growth to £205.2 million
23.4% Revenue Growth at Constant Currency
IFRS diluted EPS £0.26 compared to £0.27 in the prior year comparative period
Adjusted diluted EPS £0.57 compared to £0.46 in the prior year comparative period

Endava plc (NYSE: DAVA) ("Endava" or the "Company") a global provider of digital transformation, agile development and intelligent automation services, today announced results for the three months ended December 31, 2022, the second quarter of its 2023 fiscal year ("Q2 FY2023").

“Endava reported another solid quarter for Q2 FY2023 as demand for our services across all regions and verticals in which we operate remained healthy,” said John Cotterell, Endava's CEO. "Even with the global economic uncertainty, digital transformation remains a priority for our clients and they value the transformation services we are delivering. Demand from new and existing clients continued to drive revenue growth in the quarter, leading to a revenue increase of 23.4% in constant currency for Q2 FY2023.”

SECOND QUARTER FISCAL YEAR 2023 FINANCIAL HIGHLIGHTS:

Revenue for Q2 FY2023 was £205.2 million, an increase of 30.2% compared to £157.7 million in the same period in the prior year.
Revenue growth rate at constant currency (a non-IFRS measure)* was 23.4% for Q2 FY2023, compared to 53.4% in the same period in the prior year.
Profit before tax for Q2 FY2023 was £20.3 million, compared to £19.1 million in the same period in the prior year.
Adjusted profit before tax (a non-IFRS measure)* for Q2 FY2023 was £41.9 million, compared to £33.0 million in the same period in the prior year, or 20.4% of revenue, compared to 20.9% of revenue in the same period in the prior year.
Profit for the period was £15.0 million in Q2 FY2023, resulting in a diluted EPS of £0.26, compared to profit of £15.4 million and diluted EPS of £0.27 in the same period in the prior year.
Adjusted profit for the period (a non-IFRS measure)* was £33.2 million in Q2 FY2023, resulting in adjusted diluted EPS (a non-IFRS measure)* of £0.57, compared to adjusted profit for the period of £26.5 million and adjusted diluted EPS of £0.46 in the same period in the prior year.

CASH FLOW:

Net cash from operating activities was £40.9 million in Q2 FY2023, compared to £35.0 million in the same period in the prior year.
Adjusted free cash flow (a non-IFRS measure)* was £37.0 million in Q2 FY2023, compared to £31.2 million in the same period in the prior year.
At December 31, 2022, Endava had cash and cash equivalents of £185.3 million, compared to £162.8 million at June 30, 2022.

* Definitions of the non-IFRS measures used by the Company and a reconciliation of such measures to the related IFRS financial measure can be found under the sections below titled “Non-IFRS Financial Information” and “Reconciliation of IFRS Financial Measures to Non-IFRS Financial Measures.”

OTHER METRICS FOR THE QUARTER ENDED DECEMBER 31, 2022:

Headcount reached 12,183 at December 31, 2022, with 11,107 average operational employees in Q2 FY2023, compared to a headcount of 10,391 at December 31, 2021 and 9,167 average operational employees in the same quarter of the prior year.
Number of clients with over £1 million in revenue on a rolling twelve month basis was 156 at December 31, 2022, compared to 107 at December 31, 2021.
Top 10 clients accounted for 31% of revenue in Q2 FY2023, compared to 34% in the same period in the prior year.
By geographic region, 33% of revenue was generated in North America, 23% was generated in Europe, 39% was generated in the United Kingdom and 5% was generated in the rest of the world in Q2 FY2023. This compares to 35% in North America, 21% in Europe, 41% in the United Kingdom and 3% in the rest of the world in the same period in the prior year.
By industry vertical, 53% of revenue was generated from Payments and Financial Services, 22% from TMT and 25% from Other in Q2 FY2023. This compares to 51% from Payments and Financial Services, 25% from TMT and 24% from Other in the same period in the prior year.

OUTLOOK:

Third Quarter Fiscal Year 2023:

Endava expects revenues will be in the range £201.0 million to £203.0 million, representing constant currency revenue growth of between 14.0% and 15.0%. Endava expects adjusted diluted EPS to be in the range of £0.52 to £0.54 per share.

Full Fiscal Year 2023:

Endava expects revenues will be in the range of £812.0 million to £817.0 million, representing constant currency growth of between 19.0% and 20.0%. Endava expects adjusted diluted EPS to be in the range of £2.20 to £2.25 per share.

This above guidance for Q3 Fiscal Year 2023 and the Full Fiscal Year 2023 assumes the exchange rates at the end of January 2023 (when the exchange rate was 1 British Pound to 1.23 US Dollar and 1.14 Euro).

Endava is not able, at this time, to provide an outlook for IFRS diluted EPS for Q3 FY2023 or FY2023 because of the unreasonable effort of estimating on a forward-looking basis certain items that are excluded from adjusted diluted EPS, including, for example, share-based compensation expense, amortisation of acquired intangible assets and foreign currency exchange (gains)/losses, the effect of which may be significant. Endava is also not able, at this time, to reconcile to an outlook for revenue growth not at constant currency because of the unreasonable effort of estimating foreign currency exchange (gains)/losses, the effect of which may be significant, on a forward-looking basis.

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding “Forward-Looking Statements” below.

RECENT BUSINESS HIGHLIGHTS:

On February 9, 2023, Endava announced the successful closing of a £350 million unsecured, multicurrency revolving credit facility. This facility is for general business purposes, including future capital investments and development activities. The facility replaced Endava’s previous unsecured revolving credit facility of £200 million, which was due to expire on October 12, 2024. It also provides for uncommitted accordion options for up to an aggregate of £150 million in additional borrowing and has two renewal options for one year each.
On October 6, 2022, Endava announced the acquisition of Lexicon Digital Pty Ltd and Lexicon Consolidated Holdings Pty Ltd, headquartered in Melbourne, Australia (“Lexicon”). Lexicon is an Australian-based technology consulting, design and engineering firm who partners with clients to build new digital solutions or accelerate digital transformation programs across enterprise systems, products and IoT using an agile delivery methodology. Lexicon’s clients include Australia’s market leaders in the insurance and wealth management sectors and an array of companies in other sectors, including entertainment, retail, agribusiness and automotive. Lexicon has 127 billable staff member in Australia (with offices in Melbourne and Sydney) and Vietnam (Ho Chi Minh).

CONFERENCE CALL DETAILS:

The Company will host a conference call at 8:00 am ET today, February 14, 2023, to review its Q2 FY2023 results. To participate in Endava’s Q2 FY2023 earnings conference call, please dial in at least five minutes prior to the scheduled start time (844) 481-2736 or (412) 317-0665 for international participants, Conference ID: Endava Call

Investors may listen to the call on Endava’s Investor Relations website at http://investors.Endava.com . The webcast will be recorded and available for replay until Tuesday, March 14, 2023.

ABOUT ENDAVA PLC:

Endava is reimagining the relationship between people and technology. By leveraging next-generation technologies, our agile, multi-disciplinary teams provide a combination of product & technology strategies, intelligent experiences, and world class engineering to help clients become digital, experience-driven businesses by assisting them in their journey from idea generation to development and deployment of products, platforms and solutions. Endava collaborates with its clients, seamlessly integrating with their teams, catalysing ideation and delivering robust solutions.

Endava services clients in Payments and Financial Services, TMT, Consumer Products, Retail, Mobility and Healthcare. As of December 31, 2022, 12,183 Endavans served clients from locations in Asia-Pacific, Middle East, North America and Western Europe and delivery locations in Argentina, Bosnia & Herzegovina, Bulgaria, Colombia, Croatia, Malaysia, Mexico, Moldova, North Macedonia, Poland, Romania, Serbia, Slovenia, Uruguay and Vietnam.

NON-IFRS FINANCIAL INFORMATION:

To supplement Endava’s Condensed Consolidated Statements of Comprehensive Income, Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Cash Flow presented in accordance with IFRS, the Company uses non-IFRS measures of certain components of financial performance. These measures include: revenue growth rate at constant currency, adjusted profit before tax, adjusted profit for the period, adjusted diluted EPS and adjusted free cash flow.

Revenue growth rate at constant currency is calculated by translating revenue from entities reporting in foreign currencies into British Pounds using the comparable foreign currency exchange rates from the prior period. For example, the average rates in effect for the fiscal quarter ended December 31, 2021 were used to convert revenue for the fiscal quarter ended December 31, 2022 and the revenue for the comparable prior period.

Adjusted profit before tax ("Adjusted PBT") is defined as the Company’s profit before tax adjusted to exclude the impact of share-based compensation expense, amortisation of acquired intangible assets, realised and unrealised foreign currency exchange (gains)/losses and fair value movement of contingent consideration, all of which are non-cash items. Adjusted PBT margin is Adjusted PBT as a percentage of total revenue.

Adjusted profit for the period is defined as Adjusted PBT together with the tax impact of these adjustments.

Adjusted diluted EPS is defined as Adjusted profit for the period, divided by weighted average number of shares outstanding - diluted.

Adjusted free cash flow is the Company’s net cash from operating activities, plus grants received, less net purchases of non-current assets (tangible and intangible).

Management believes these measures help illustrate underlying trends in the Company's business and uses the measures to establish budgets and operational goals, communicated internally and externally, for managing the Company's business and evaluating its performance. Management also believes the presentation of its non-IFRS financial measures enhances an investor’s overall understanding of the Company’s historical financial performance. The presentation of the Company’s non-IFRS financial measures is not meant to be considered in isolation or as a substitute for the Company’s financial results prepared in accordance with IFRS, and its non-IFRS measures may be different from non-IFRS measures used by other companies. Investors should review the reconciliation of the Company’s non-IFRS financial measures to the comparable IFRS financial measures included below, and not rely on any single financial measure to evaluate the Company’s business.

FORWARD-LOOKING STATEMENTS:

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by the use of terms and phrases such as “believe,” “expect,” "outlook," “may,” “will,” and other similar terms and phrases. Such forward-looking statements include, but are not limited to, the statements regarding Endava’s projected financial performance for the third fiscal quarter of fiscal year 2023 and the full fiscal year 2023. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to: Endava’s business, results of operations and financial condition may be negatively impacted by the Russia-Ukraine armed conflict or if general economic conditions in Europe, the United States or the global economy continue to worsen, including increased inflation; Endava’s ability to manage its rapid growth or achieve anticipated growth; Endava’s ability to retain existing clients and attract new clients, including its ability to increase revenue from existing clients and diversify its revenue concentration; Endava’s ability to attract and retain highly-skilled IT professionals at cost-effective rates; Endava's ability to penetrate new industry verticals and geographies and grow its revenue in current industry verticals and geographies; Endava’s ability to maintain favorable pricing and utilization rates; Endava’s ability to successfully identify acquisition targets, consummate acquisitions and successfully integrate acquired businesses and personnel; the effects of increased competition as well as innovations by new and existing competitors in its market; Endava’s ability to adapt to technological change and innovate solutions for its clients; Endava’s ability to collect on billed and unbilled receivables from clients; Endava’s ability to effectively manage its international operations, including Endava's exposure to foreign currency exchange rate fluctuations; Endava’s ability to maintain an effective system of disclosure controls and internal control over financial reporting; and Endava’s future financial performance, including trends in revenue, cost of sales, gross profit, selling, general and administrative expenses, finance income and expense and taxes, as well as other risks and uncertainties discussed in the “Risk Factors” section of our Annual Report filed with the SEC on October 31, 2022. In addition, the forward-looking statements included in this press release represent Endava’s views and expectations as of the date hereof and are based on information currently available to Endava. Endava anticipates that subsequent events and developments may cause its views to change. Endava specifically disclaims any obligation to update the forward-looking statements in this press release except as required by law. These forward-looking statements should not be relied upon as representing Endava’s views as of any date subsequent to the date hereof.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


Six Months Ended December 31
Three Months Ended December 31

2022
2021
2022
2021

£’000
£’000
£’000
£’000
REVENUE
401,410

305,133

205,241

157,668

Cost of sales




Direct cost of sales
(249,253
)
(189,292
)
(126,282
)
(99,806
)
Allocated cost of sales
(12,243
)
(11,090
)
(6,460
)
(5,800
)
Total cost of sales
(261,496
)
(200,382
)
(132,742
)
(105,606
)
GROSS PROFIT
139,914

104,751

72,499

52,062

Selling, general and administrative expenses
(76,242
)
(59,624
)
(37,364
)
(31,981
)
Net impairment losses on financial assets
(3,644
)
(1,812
)
(2,340
)
(651
)
OPERATING PROFIT
60,028

43,315

32,795

19,430

Net Finance income / (expense)
(1,189
)
683

(12,524
)
(354
)
PROFIT BEFORE TAX
58,839

43,998

20,271

19,076

Tax on profit on ordinary activities
(12,092
)
(8,047
)
(5,252
)
(3,670
)
PROFIT FOR THE PERIOD
46,747

35,951

15,019

15,406

OTHER COMPREHENSIVE INCOME




Items that may be reclassified subsequently to profit or loss:




Exchange differences on translating foreign operations
823

(1,528
)
(7,157
)
(3,577
)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO OWNERS OF THE PARENT
47,570

34,423

7,862

11,829






EARNINGS PER SHARE (EPS):




Weighted average number of shares outstanding - Basic
56,962,777

55,911,086

57,219,704

56,173,171

Weighted average number of shares outstanding - Diluted
57,923,559

57,880,029

57,959,580

58,019,316

Basic EPS (£)
0.82

0.64

0.26

0.27

Diluted EPS (£)
0.81

0.62

0.26

0.27

CONDENSED CONSOLIDATED BALANCE SHEETS


December 31, 2022
June 30, 2022
December 31, 2021 ⁽¹⁾

£’000
£’000
£’000
ASSETS - NON-CURRENT



Goodwill
189,684

145,916

126,316

Intangible assets
55,114

56,189

57,068

Property, plant and equipment
24,768

21,260

17,273

Lease right-of-use assets
62,034

50,818

51,688

Deferred tax assets
13,491

17,218

22,812

Financial assets
1,393

2,276

189

TOTAL
346,484

293,677

275,346

ASSETS - CURRENT



Trade and other receivables
173,750

162,671

143,840

Corporation tax receivable
2,343

2,309

1,193

Financial assets
226

392

444

Cash and cash equivalents
185,323

162,806

114,176

TOTAL
361,642

328,178

259,653

TOTAL ASSETS
708,126

621,855

534,999

LIABILITIES - CURRENT



Lease liabilities
13,768

11,898

11,960

Trade and other payables
96,481

98,252

93,954

Corporation tax payable
4,245

3,477

384

Contingent consideration
6,385

4,183

5,904

Deferred consideration
9,858

10,604

6,838

TOTAL
130,737

128,414

119,040

LIABILITIES - NON CURRENT



Lease liabilities
53,953

43,999

44,648

Contingent consideration
—

4,331

—

Deferred tax liabilities
11,021

10,826

8,901

Deferred consideration
1,407

1,062

2,831

Other liabilities
545

500

191

TOTAL
66,926

60,718

56,571

EQUITY



Share capital
1,150

1,135

1,130

Share premium
21,389

9,152

4,541

Merger relief reserve
30,003

30,003

30,003

Retained earnings
462,767

398,102

338,996

Other reserves
(4,691
)
(5,514
)
(15,127
)
Investment in own shares
(155
)
(155
)
(155
)
TOTAL
510,463

432,723

359,388

TOTAL LIABILITIES AND EQUITY
708,126

621,855

534,999

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


Six Months Ended December 31
Three Months Ended December 31

2022
2021
2022
2021

£’000
£’000
£’000
£’000
OPERATING ACTIVITIES




Profit for the period
46,747

35,951

15,019

15,406

Income tax charge
12,092

8,047

5,252

3,670

Non-cash adjustments
24,974

32,970

18,875

18,228

Tax paid
(10,047
)
(5,701
)
(8,437
)
(3,468
)
Net changes in working capital
(7,635
)
(16,396
)
10,186

1,126

Net cash from operating activities
66,131

54,871

40,895

34,962






INVESTING ACTIVITIES




Purchase of non-current assets (tangibles and intangibles)
(7,591
)
(7,398
)
(4,148
)
(3,836
)
Proceeds from disposal of non-current assets
16

171

(3
)
59

Payment for acquisition of subsidiary, net of cash acquired
(32,397
)
(611
)
(32,397
)
—

Interest received
797

20

432

11

Net cash used in investing activities
(39,175
)
(7,818
)
(36,116
)
(3,766
)





FINANCING ACTIVITIES




Proceeds from sublease
237

277

92

142

Repayment of lease liabilities
(6,491
)
(7,123
)
(3,392
)
(3,322
)
Interest paid
(423
)
(475
)
(206
)
(226
)
Grant received
220

43

220

42

Issue of shares
2,266

4,299

2,245

4,299

Net cash (used in)/from financing activities
(4,191
)
(2,979
)
(1,041
)
935

Net change in cash and cash equivalents
22,765

44,074

3,738

32,131






Cash and cash equivalents at the beginning of the period
162,806

69,884

182,395

82,034

Exchange differences on cash and cash equivalents
(248
)
218

(810
)
11

Cash and cash equivalents at the end of the period
185,323

114,176

185,323

114,176

RECONCILIATION OF IFRS FINANCIAL MEASURES TO NON-IFRS FINANCIAL MEASURES

RECONCILIATION OF REVENUE GROWTH RATE AS REPORTED UNDER IFRS TO REVENUE GROWTH RATE AT CONSTANT CURRENCY:

Six Months Ended December 31

Three Months Ended December 31

2022

2021

2022

2021

REVENUE GROWTH RATE AS REPORTED UNDER IFRS

31.6

52.3

30.2

49.8

Foreign exchange rates impact

(6.9

4.6

(6.8

3.6

REVENUE GROWTH RATE AT CONSTANT CURRENCY

24.6

56.9

23.4

53.4

RECONCILIATION OF ADJUSTED PROFIT BEFORE TAX AND ADJUSTED PROFIT FOR THE PERIOD:

Six Months Ended December 31

Three Months Ended December 31

2022

2021

2022

2021

£’000

PROFIT BEFORE TAX

58,839

43,998

20,271

19,076

Adjustments:

Share-based compensation expense

15,909

20,916

6,365

11,758

Amortisation of acquired intangible assets

6,207

4,941

3,188

2,480

Foreign currency exchange (gains) / losses, net

7,533

(2,060

)

14,947

(303

)

Fair value movement of contingent consideration

(7,143

)

—

(2,894

)

—

Total adjustments

22,506

23,797

21,606

13,935

ADJUSTED PROFIT BEFORE TAX

81,345

67,795

41,877

33,011

PROFIT FOR THE PERIOD

46,747

35,951

15,019

15,406

Adjustments:

Adjustments to profit before tax

22,506

23,797

21,606

13,935

Tax impact of adjustments

(4,734

)

(4,977

)

(3,404

)

(2,870

)

ADJUSTED PROFIT FOR THE PERIOD

64,519

54,771

33,221

26,471

Diluted EPS (£)

0.81

0.62

0.26

0.27

Adjusted diluted EPS (£)

1.11

0.95

0.57

0.46

RECONCILIATION OF NET CASH FROM OPERATING ACTIVITIES TO ADJUSTED FREE CASH FLOW

Six Months Ended December 31

Three Months Ended December 31

2022

2021

2022

2021

£’000

Net cash from operating activities

66,131

54,871

40,895

34,962

Adjustments:

Grant received

220

Purchases of non-current assets (tangibles and intangibles)

(7,575

)

(7,227

)

(4,151

)

(3,777

)

Adjusted Free cash flow

58,776

47,687

36,964

31,227

SUPPLEMENTARY INFORMATION

SHARE-BASED COMPENSATION EXPENSE

Six Months Ended December 31

Three Months Ended December 31

2022

2021

2022

2021

£’000

Direct cost of sales

10,297

12,675

4,340

7,329

Selling, general and administrative expenses

5,612

8,241

2,025

4,429

Total

15,909

20,916

6,365

11,758

DEPRECIATION AND AMORTISATION

Six Months Ended December 31

Three Months Ended December 31

2022

2021

2022

2021

£’000

Direct cost of sales

8,626

8,024

4,539

4,108

Selling, general and administrative expenses

7,461

6,162

3,843

3,105

Total

16,087

14,186

8,382

7,213

EMPLOYEES, TOP 10 CUSTOMERS AND REVENUE SPLIT


Six Months Ended December 31
Three Months Ended December 31

2022
2021
2022
2021





Closing number of total employees (including directors)
12,183

10,391

12,183

10,391

Average operational employees
11,031

8,825

11,107

9,167






Top 10 customers %
32
%
35
%
31
%
34
%
Number of clients with > £1m of revenue (rolling 12 months)
156

107

156

107






Geographic split of revenue %




North America
34
%
36
%
33
%
35
%
Europe
22
%
20
%
23
%
21
%
UK
40
%
41
%
39
%
41
%
Rest of World (RoW)
4
%
3
%
5
%
3
%
Industry vertical split of revenue %




Payments and Financial Services
53
%
50
%
53
%
51
%
TMT
22
%
25
%
22
%
25
%
Other
25
%
25
%
25
%
24
%

FOOTNOTES

(1) The Condensed Consolidated Balance Sheet as of December 31, 2021 has been restated to include the effects of IFRIC agenda decision on cloud configuration and customisation costs and to include the effect of revisions arising from provisional to final acquisition accounting for Five and Levvel (refer to note 3C from our Annual Report on Form 20-F for the fiscal year ended June 30, 2022 for details).

View source version on businesswire.com: https://www.businesswire.com/news/home/20230213005495/en/

INVESTOR CONTACT:
Endava Plc
Laurence Madsen, Investor Relations Manager
Investors@endava.com

Company Name:	Endava plc American Depositary Shares
Stock Symbol:	DAVA
Market:	NYSE
Website:	endava.com

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